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16 May 2019

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SRW

Interesting article by David P. Goldman, Asia Times, about how to deal with China.

https://www.asiatimes.com/2019/04/opinion/the-chinese-tortoise-and-the-american-hare/

Jack

TTG,

In the name of tolerance of another culture are we going to surrender to their predatory behavior? Are we going to allow the Chinese to continue to "beat us at our own game" as Walrus alludes? Sure the Party of Davos have benefited from the current relationship but why should the US in it's national interest continue to allow an authoritarian state to steal our IP, subsidize their companies to dump products in our market and prevent our companies to sell into their market unless they transfer technology, only to have it stolen?

That type of predatory behavior is not about cultural difference but taking advantage of a situation that we allowed. Tariffs may not be the best strategy but at least Trump is saying the current arrangement no longer works. It makes no sense to say in order to protect Chinese "face" we should continue this arrangement where we have the short end of the deal. I hope that Trump doesn't back down in the face of Chinese influence operations in the US and his perception of what's best for his reelection. IMO, the Chinese threat is significantly larger than any threat from Russia or Iran, and saying we should walk on eggshells to not offend their cultural sensibilities is frankly ridiculous.

I believe Walrus over-estimates their strengths. There is a reason why their "best and brightest" continue to immigrate to Silicon Valley in droves. I know some of them personally as I have backed their entrepreneurial ventures. They will be the first to tell you that they have given up a lot in terms of familial connection to immigrate to the US as they don't share nor do they want their kid's futures to be subject to the capriciousness of Xi Jinping's authoritarian vision.

Ryan

"If that is blocked, then virtual hi-tech machine manufacturing will restore capacity still absent jobs...

"but long term the only way for the U.S. to compete is hi-tech automated factories that will not be able to sustain good paying jobs for 300+ million Americans."

If we're making choices, that is a vast improvement over the situation we have now. It's what we should have done in the first place. And while I can't prove this, the second order effect of having hi-tech automated factories all over the country would do quite a lot to improve the lives of the people who might have worked in factories in generations prior.

robt willmann

Robert Groves,

Chas Freeman was president Richard Nixon's senior interpreter for Nixon's visit to China. Here is an interesting description by Freeman of some of that trip--

https://adst.org/2013/05/the-interpreter-who-said-to-no-to-president-nixon/

jdledell

Just as a reminder - having run International businesses, I just want to clairify that U.S. Businesses are not saints. There is a certain amount of cheating, browbeating and stealing as long as we don't get caught and profits are increasing. We might not like the Chinese using our methods but that is the way the cookie crumbles. At this point about two-thirds of Prudential's profits come from overseas subsidiaries and one of the reasons for that success is our ability to mimic what works in their domestic companies and to do it somewhat better and cheaper. Since the profits were repatriated to the U.S., I had to deal with a lot of government flack about hurting their domestic companies and their employees.

Mightypeon

From my own interactions with the Chinese:

1: Highly sophisitaced Culture. They tend to react pretty well if one can show a more then basic degree of understanding of their history.

2: They great prefer nuance. Simple awnsers imply simple minds.

3: I have not been in the position to actually have to get formal contracts with them. I can certainly echo however that making a Chinese promise something in front of other Chinese about whose perception he cares is usually sufficient to have a pretty honorable commitment to something, it is often easier said then done.

4: I initially had some disdain for the Chinese way of not directly letting you know how annoyed they are at any given point (Russians are fairly straightforward in this), but essentially, their point of view is also that if you are incapable of assessing how annoyed they are you are not a valid negotiation partner.

5:
Also, keeping annoyance beneath the radar does not create scenes, and if a scene is created reactions may have to be forced. Vengeance is a thing with the Chinese . My impression is that they can be mollified though, and generally regard vengeance as an expensive luxury item, I also got the impression that you need to go out of your way to seriously become a target of vengeance, just professional disagreements are not a cause for vengeance, especially not if you are a foreigner. They also have a pathway of not having to take vengeance to save their faces by asserting that the offender is insane/feebleminded/crazy and thus beneath vengeance. Its not a position you want to be in though.

6:
It goes a pretty long way to be aware of some more imaginative things that especially state aligned business can do if you are in China. Things like precision weighing any electronic equipment you take there before and after are just best practice.

VietnamVet

Fred,

GM sold over 4 million vehicles in China last year, even more than it sold in the North American market. The U.S. only exported 267,000 passenger vehicles to China. Apple sales declined 30% in China. In an economic war Chinese will avoid buying American branded products. They have alternatives. Americans don’t have a choice at Walmart except to pay the higher prices due to the tariffs.

blue peacock

Sure, they've kicked our ass these past couple decades. Now they've got cocky and think they own us. Supply chains can re-orient.

As a red-blooded American I'd like my home team to seriously up their game and of course beat the Chinese at their own mercantilist game. A good start would be to put the squeeze on their massive USD short position. Eurodollar market is a perfect spot to begin. The Chinese have US$1.3 trillion debt maturing in 12 months. They've either got to redeem or rollover. Devalue & bleed reserves. Or else sell USD assets & lose collateral. Margin call time! Wake-up call time for BRI - if Trump chooses to squeeze at this immediate vulnerability. Trump can also take the next critical step - restrict their access to our capital markets. The SEC can also come down hard on all their fraudulent listings.

Maybe Australia is losing its best & brightest moving to China. Not here. In fact it is the opposite. Young Chinese techies whoever can get a visa are immigrating here. Wealthy Chinese including top CCP officials are using every mechanism that they can avail to get their capital out. Chinese capital controls are tightening. If they had an open capital account their trillion dollar reserve would vanish overnight as capital flees. You must know that China's domestic security budget is larger than their defense budget. The CCP fear their own people more than anyone else. Why do you think they're amping up their domestic surveillance expenditure?

I can also give you an anecdotal experience. Newly minted billionaire and founder of Zoom, Eric Yuan spoke to our tech analyst team a year ago. I happened to be in that meeting. He was categorical that if he had been in China and had half the success, CCP would effectively control his company. He said every Chinese techie dreams of moving to America.

https://www.cnbc.com/2019/04/18/zoom-ipo-bill-gates-speech-inspired-founder-to-move-to-us.html

Jack Ma, was banded out here in the west as the new breed Chinese tech entrepreneur. A billionaire on the Davos circuit. Did he really own Alibaba or was it the CCP? How come his shareholding was suddenly zeroed out?

https://www.scmp.com/tech/enterprises/article/2167002/alibabas-jack-ma-giving-ownership-chinese-entities-heres-what-means

Do you think any smart Chinese really trusts the CCP? Why would they? You talk about "face" & culture and the 3,000 year history of the Han people. What about the history & culture of the Tibetans? Or the culture & traditions of the Uyghurs with over 2 million of them currently undergoing brutal "re-education" in concentration camps in Xinjiang?

The authoritarian CCP have had a free ride on us for over two decades. It is time to suit up and give them a little taste of their own medicine. I hope Trump retains his resolve.

guidoamm

Apologies for butting-in in an otherwise fascinating conversation... but....

There is considerable but misplaced talk of "capitalism" being thrown about in some threads, whilst Harlan worries about the deindustrialization of the West, ostensibly, due to China.

China has little to do with deindustrialization.

A centralized monetary system coupled with electoral politics, can only be sustained through the use of perpetual fiscal deficits.

In order for the political construct to be able to run perpetual fiscal deficits, national debt must necessarily expand.

As debt conforms to the law of diminishing marginal utility however, this is a compounding strategy.

Thus, in order to compensate for the loss of purchasing power, government borrowing must progressively increase till eventually it goes parabolic. Hence the reason debt in the USA doubled between 2008 and 2016. This is the parabolic phase.

In order to sustain this strategy, fiscal revenue must ideally expand.

In order to increase fiscal revenue however, legislation must be brought to bear.

As legislation and fiscality become progressively more restrictive in one country, economic actors migrate to countries where they can achieve an economic advantage.

As a corollary, as legislation and fiscality become progressively more restrictive, barriers are raised in business and industry. As barriers rise, so does unemployment and/or under employment whilst business dynamism is proportionally stifled.

In this context therefore, artificially lowering interest rates to ostensibly kick start the economy, actually reinforces the offshoring dynamic to the detriment of SMEs and the benefit of large corporations.

If China can be blamed for anything therefore, it can only be blamed to have opened the doors wide open to Western corporations to allow them to shift their production technology out of Europe and the USA.

All the while, the finance industry is laughing all the way to the bank.... their own bank that is....

g

Fred

VV,

Those GM vehicles were built in China by a jv with majority Chinese ownership. The product line sold at Wal-Mart has plenty of things made in countries other than china. We have a twenty trillion dollar economy with Chinese imports making up 500 billion. We've got plenty of options.

Procopius
So unless we economically surrender to them expect war?
See, that's the attitude Trump and the Trade Representative display. It is impossible we could find a compromise that would be better for both sides. It is a purely binary zero-sum game. If we do not "win," then we "lose," which means surrendering to an implacable enemy who will destroy us. It's no wonder the majority of the world's people think America is the greatest danger to world peace. This is why Bolton is able to find support throughout the nomenklatura. Most Chinese still hold to Confucian concepts of honor, something the American elites abandoned decades ago as unprofitable.
Procopius

Oh, dear.

The U.S. must show the military capability in the area so China dies not make a mis-step.
Is "showing military capability" a provocation? If the Iranians "show military capability" by mounting anti-ship missiles on dhows (small wind-powered sailing vessels, primarily used for commerce), will that prevent the U.S. from making a misstep? Or will it cause us to send a carrier group to the Persian Gulf? Does nobody here remember the results of the Millenium Challenge war game in 2002?lose.

Procopius

America also took advantage of the Chinese losses to get all the benefits of the "unequal treaties," and the Chinese noted it at the time and have not forgotten.

The Twisted Genius

Jack, why surrender to their predatory behavior? Just stop dealing with them. Stop allowing American nationalists to buy Chinese made goods and stop selling China our goods. Why not make the stuff ourselves or learn to do without? Why are those American farmers growing soybeans for the Chinese. Let them grow stuff for Americans. Sure this approach is even more extreme that the current tariff war, but it will make us immune to Chinese predatory practices, won't it? The isolation of Sakoku as the purest form of American nationalism. As an added benefit of implementing a policy of Sakoku, there would be no more American foreign adventurism.

I say this tongue in cheek realizing it will never be implemented. But wouldn't this a better implementation of American nationalism than demanding that all other countries simply bend to our demands in all matters?

Jack

TTG,

I wholeheartedly agree with you that we should end our overseas interventionism. I've opposed it for a long time from Vietnam to Iraq & Syria. The costs in the trillions of dollars, the destabilization of fragile societies to the unnecessary sacrifices of our soldiers and their families have not provided any meaningful benefit to us.

As far as China is concerned I believe the situation is more complex. One thing I've noticed in general and exemplified by the comments on this thread is the conflation of the heritage and Confucian values of the Chinese people on the CCP. Let's not be under any illusion. The CCP is unabashedly totalitarian. I've no quarrel with the Chinese people. On the contrary they have my deepest sympathies for having to endure under the boot of the CCP. Of course any change in their form of government is for them to effect just as our forefathers did here. The important point that I believe needs to be made is that we provided the finance, the technology and the markets to enable the economic development of an authoritarian regime. An argument can be made that those early decisions to bring in China into the global economic framework was in the belief it would enable them to reform. I was persuaded then by Sir James Goldsmith & Ross Perot and others that the GATT trade deal driven by Wall St would be a disaster for our working class. Neither Bill Clinton nor the Republicans asked the question then what if the CCP doesn't reform and instead intensifies their authoritarianism?

Of course the big transfer of our industrial base was completely our own doing as our political system is fully captured by the Party of Davos. In retrospect it should be clear that the CCP never intended to relinquish their monopoly on power and would become even more repressive to maintain it. The CCP is not our friend. They are an implacable enemy who are now using their growing economic and military strength to directly interfere and subvert our societies. The scale of their influence operations and the direct use of cash to purchase influence and espionage is something much larger than at the depth of the Cold War with the Soviet Union. It is high time we understand this threat and act. At least Trump in his own limited way gets that something needs to change even if in his mind it is purely transactional. I'd like to highlight a current example where the Trump administration is moving to ban Huawei from our market. Opeds are being furiously written and published in our national media in defense of Huawei, while the company hires the top cybersecurity official in the Obama administration with top secret clearance as their lobbyist. There are no Opeds here or in China that Google, Facebook, and other US companies are banned in China. Why is that? IMO, it's because we accept the authoritarianism of the CCP. The neocons made a lot of noise demonizing Sadam & Assad as brutal dictators, yet they're silent as Xi Jinping has millions of Uighurs in concentration camps. If we don't act to check the CCP now our grandchildren will regret it as they'll have to fight a war.

Mightypeon

I also think that many in this thread considerably overestimate Americas economic strength compared to Chinas. There are very few cases in history were the debtor defeated the creditor in an economic contest. The Opium wars were military, and the Chinese have invested much into those not happening again.

I also believe that the Chinese are currently quite stable, the current Mao dynasty will follow the trajectory of other dynasties and probably has a couple of hundred years more left in it.
Meanwhile the state of American ideology somewhat reminds me of the state of catholicism just before Luther nailed his theses to the church door.
Many of Americas quite positive traditions appear to have been corrupted or forgotten, several competing heterodox creeds have essentially became "dogma", freedom of speech is underassault by mobs of online witch hunters and any state attorney can essentially imprison anyone, the US legal code has a crime for everything.


Jim S

Traditional Chinese society was heavily damaged by the Great Cultural Revolution; the One-Child Policy finished it off. Consider that filial piety has been replaced by a near slavish devotion to the child--all hope rests on this single descendant. It's understood that the abolition of this policy came too late to avoid the demographic repercussions. The social repercussions may be easier to undo, but it will take generations--if China wishes to undo them.

China is a communist state. Those who know communism know that the communist state wishes to be the father and the mother; the aunt and the uncle; the grandfather and grandmother; the well-spring of all things good. Communism insists that devotion to the family be transformed into devotion to the state, at least for the masses. It is an error to speculate that the surveillance state is implemented to counter traditional filial piety: filial piety will be eradicated.

The masses are required to report biographical data on their families and themselves. Technology will make it possible to cross-check accounts for falsehoods. Families are encouraged to report each other for criminal activities. This is only a sampling of what is going on in China. If you wish to study further, the China Uncensored channel on YT is a good place to start. I suggest China has changed significantly recently and is under greater economic and social stress (to say nothing of international politics) than is commonly understood: it's worth updating your knowledge of China if you haven't looked at it in the past ten years.

It's possible that China is the target of intense propaganda; the possibility that it is also a totalitarian state is not mutually exclusive.

Col. Lang, I understand if you don't publish this comment. I hope you will take it under advisement nonetheless.

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